Allen v TRW Systems Ltd

An enhanced redundancy policy may have contractual effect even where the policy as a whole contains non-contractual material and is absent from the statutory written statement of terms. The question is whether, objectively, the circumstances support an inference that the employer intended to be contractually bound.

The factors identified in Albion Automotive Limited v Walker are relevant but non-exhaustive, and no fixed weight should be assigned to them. Tribunals must consider whether an employee handbook contains an express contractual promise to implement the policy, together with subsequent assurances and the importance of enhanced redundancy payments as part of the remuneration package.

Employees of TRW Systems Ltd appealed against an Employment Tribunal judgment dated 26 October 2011 dismissing their claim that an enhanced redundancy policy formed part of their contracts of employment. The policy had been agreed with an Advisory Council, referred to in the Employee Handbook, and later confirmed in correspondence.

The Employment Tribunal held that the policy was not contractual and, in any event, provided for three payment elements rather than four. The appeal concerned both the construction of the policy and whether its enhanced severance provisions had been incorporated expressly or by implication.

1. Policy construction. The policy provided for three elements: statutory redundancy pay; pay in lieu of notice calculated by reference to the preceding 12 weeks and including overtime and shift premium; and a special payment based on length of service. The opening provisions did not create a separate uncapped redundancy payment. Payments made on a different basis could not alter the policy’s true meaning.
2. Contractual incorporation. The Employment Tribunal erred in law by failing to consider whether the Employee Handbook was a source of contractual obligation. Its express promise that the redundancy policy would be implemented in the event of redundancies required consideration, particularly because the policy prescribed specific payments and appeared to leave no discretion.
3. The fundamental question was whether the circumstances objectively supported an inference that the employer intended to become contractually bound. The factors in Albion Automotive Limited v Walker were relevant but not exhaustive and did not prescribe the weight to be given to individual considerations. The Tribunal also had to consider the significance of enhanced redundancy payments as a recognised part of an employee’s remuneration package.
4. The Tribunal failed adequately to consider the later assurances that the policy would remain in its entirety and stay as it was until renegotiated. Those assurances supported a reasonable expectation that the payments would be made unless the policy was renegotiated. The Tribunal also treated mistaken payment of four elements as failure to follow the policy, whereas the relevant question was whether the employer intended to follow it.
5. The appeal was allowed. The issue involved mixed fact and law and the correct answer was not plain beyond argument. The question whether the enhanced severance provisions were contractual was remitted for reconsideration by a freshly constituted Employment Tribunal.

• Employment Tribunal, Newcastle upon Tyne: By judgment dated 26 October 2011, the claim that the enhanced redundancy terms were contractual was dismissed.
• Employment Appeal Tribunal: The appeal was allowed because the Tribunal had adopted too narrow an approach to incorporation and had failed to consider the Employee Handbook and subsequent promises. The issue was remitted to a freshly constituted Employment Tribunal.